# 12.5% Corporate Tax in Portugal's Interior (Low-Density) Regions

> How startups and SMEs pay 12.5% IRC on their first €50,000 of profit by operating from Portugal's interior territories — conditions, pitfalls and how to set up.

Source: https://getlda.pt/guides/irc-12-5-percent-interior-portugal · Updated 2026-09-28

**Quick answer:** Micro, small and medium-sized companies (and small mid caps) whose activity and effective management are located in one of Portugal's interior territories pay IRC at 12.5% on the first €50,000 of taxable profit, instead of 15%. The benefit comes from article 41.º-B of the Tax Benefits Statute (EBF), applies to the 165 municipalities and 73 parishes listed in Portaria 208/2017, and counts towards the EU de minimis aid ceiling. Registering the company at an interior address is not enough on its own — the business must genuinely operate and be managed there.

Portugal uses its corporate tax system to encourage businesses to set up away from the crowded coast. If your company operates from one of the country's **interior territories** — often described as low-density regions — it can pay a reduced **12.5% IRC rate** on its first €50,000 of taxable profit.

This guide explains exactly who qualifies, what the tax authority looks at, how much you actually save, and how the separate 12.5% rate for certified startups fits in.

## The rule in one paragraph

Under **article 41.º-B of the Estatuto dos Benefícios Fiscais (EBF)**, companies that qualify as micro, small or medium-sized enterprises (or *small mid caps*) and that carry out — directly and as their main business — an agricultural, commercial, industrial or service activity in an interior territory pay IRC at **12.5% on the first €50,000 of taxable profit**. Profit above that amount is taxed at the normal rate (19% in 2026).

## Which areas count as "interior"?

The eligible areas are listed in **Portaria n.º 208/2017, of 13 July**, which delimits the territories covered by the National Programme for Territorial Cohesion (PNCT). It covers:

- **165 municipalities** in full; and
- **73 parishes** (*freguesias*) in municipalities that are only partly covered.

Most of the eligible territory lies in the north-east, the centre and the Alentejo — districts such as Bragança, Vila Real, Guarda, Castelo Branco and Portalegre — but the list is set parish by parish in partly covered municipalities, so **always check the exact address** against the official annex published in the *Diário da República*. The same list is used for other interior incentives, such as the *Emprego Interior MAIS* relocation support.

"Low-density territory" (*território de baixa densidade*) is a closely related but separate classification used for EU funding. For this tax benefit, only the Portaria 208/2017 list matters.

## Who qualifies

A company can use the reduced rate when **all** of the following are true:

| Requirement | What it means in practice |
|---|---|
| **Size** | The company is a micro, small or medium-sized enterprise under the EU definition, or a small mid cap. Most new Lda.s qualify. |
| **Activity in the territory** | It carries out its agricultural, commercial, industrial or service activity directly and mainly in an interior territory. |
| **Effective management in the territory** | The place where key management decisions are made is also in the interior territory. |
| **No overdue salaries** | The company has no salaries in arrears. |
| **Not created by a spin-off** | The company doesn't result from a split (*cisão*) carried out in the two years before it first uses the benefit. |
| **Normal assessment method** | Taxable profit is determined by direct assessment or under the IRC simplified regime. |

Any legal form can qualify — an [Lda.](https://getlda.pt/guides/how-to-register-a-company-in-portugal), a [Unipessoal Lda.](https://getlda.pt/guides/unipessoal-lda) or an S.A. — and there's no requirement for the partners to be Portuguese or resident.

## A registered address alone is not enough

This is the most common misunderstanding. The tax authority's position, confirmed in binding rulings, is that the company must **exercise its activity and have its effective management** in the eligible area. A registered office (*sede*) in an interior village while the team works and decides everything in Lisbon or Porto does **not** qualify.

Where a company operates in both interior and non-interior areas, the tax authority looks at where the activity is carried out **most significantly and predominantly**. Practical evidence includes:

- a real place of business — an office, workshop, farm, shop or coworking space — in the eligible municipality or parish;
- managers who live in, or regularly work from, the area and take their decisions there (board minutes, contracts signed there);
- employees based there, and operating costs incurred there.

A [virtual office](https://getlda.pt/guides/registered-office-virtual-office-portugal) on its own is unlikely to satisfy the test. Portugal's network of public coworking spaces in the interior can be a cost-effective way to establish a genuine presence.

## How much do you actually save?

The benefit only applies to the first €50,000 of taxable profit, and most SMEs already pay a reduced rate on that slice. In 2026:

| Taxable profit | SME outside the interior | SME in an interior territory |
|---|---|---|
| First €50,000 | 15% | **12.5%** |
| Above €50,000 | 19% | 19% |

For a company making €50,000 or more of taxable profit, the reduced rate saves **€1,250 a year** in 2026 (2.5 percentage points on €50,000). The saving is the gap between the two rates, so it changes whenever the SME rate does.

On their own, the numbers rarely justify moving. The case becomes stronger when you add:

- **Job creation**: for companies using this regime, costs of **net job creation** are deductible at **120%** of their amount when calculating taxable profit. Only permanent (open-ended) contracts count, and the net increase is measured on the monthly average headcount of each year — the tax authority set out the calculation in Ofício-circulado 20275/2025.
- **Municipal surcharge**: the *derrama municipal* is set by each municipality (up to 1.5%), and many interior municipalities charge less or nothing for small companies.
- **Lower operating costs**: rent, salaries and office space are usually well below Lisbon and Porto levels.

## The separate 12.5% rate for certified startups

Portugal also applies a **12.5% rate on the first €50,000 of taxable profit** to companies certified as **startups** under Law 21/2023 — **wherever in Portugal they are located**. In broad terms, a startup must:

- have been operating for less than 10 years;
- employ fewer than 250 people and have annual turnover of up to €50 million;
- not result from the transformation or split of a large company, nor be majority-owned by one;
- have its head office or a permanent establishment in Portugal (or at least 25 employees in Portugal);
- be innovative — for example, by having raised a qualifying venture capital or business angel investment, or by being recognised as innovative by Startup Portugal or ANI.

Startup status is recognised through the government's *Balcão do Empreendedor* / Startup Portugal process. If your company qualifies as a startup, it gets the 12.5% rate without needing to be in the interior; the two reduced rates can't be stacked on top of each other.

## De minimis: the ceiling you need to track

The interior rate is **state aid under the EU de minimis rules**. Under Regulation (EU) 2023/2831, the total de minimis aid a single undertaking (including companies in the same group) may receive is **€300,000 over any three-year period**. The tax saved each year counts towards that ceiling, together with any other de minimis aid — such as certain grants.

For most small companies the ceiling is far away, but groups with several Portuguese companies should track it.

## How the benefit is claimed

There's no prior application. The company applies the reduced rate in its annual **IRC return (Modelo 22)**, and declares the benefit in **Annex D, table 09 (field 904-C)**, where de minimis benefits are reported. Your [certified accountant](https://getlda.pt/guides/accountant-requirements-portugal) should also keep a file proving that the activity and management are genuinely in the interior, in case of an inspection. The benefit isn't cumulative with other benefits of the same kind, so your accountant will choose the most favourable one.

## How GetLDA.pt helps you set up in the interior

We help founders structure an interior company so the benefit holds up:

1. **Eligibility check** — we confirm your intended address against the municipality and parish list in Portaria 208/2017.
2. **Registration with an interior registered office** — your Lda. is incorporated with its seat in the eligible territory, and the articles and management structure reflect where decisions will be made.
3. **A genuine local presence** — we point you to office, coworking and domiciliation options in the area, and explain what evidence to keep.
4. **Accountant referral** — we introduce you to a certified accountant familiar with article 41.º-B, net job creation and de minimis reporting.

Mention in your registration form that you want an interior location and we'll take it from there. Working remotely? See our page for [digital nomads and remote founders](https://getlda.pt/nomads).

## Frequently asked questions

### Is the 12.5% rate automatic if my company is registered in an eligible municipality?

No. The company must also carry out its activity and have its effective management there. The registered address is only one piece of evidence.

### Can a company owned by foreigners or non-residents use it?

Yes. The benefit depends on the company's size, activity and location, not on the nationality or residence of its partners. See [opening a company as a non-resident](https://getlda.pt/guides/open-a-company-in-portugal-as-a-non-resident).

### Can I work remotely from Lisbon while the company is based in the interior?

If the company's activity and management are mainly carried out outside the interior, it's unlikely to qualify. Take advice before relying on the benefit in that situation.

### Do Madeira and the Azores have the same rule?

The autonomous regions apply their own regional reductions to IRC rates, which can be lower. The figures above apply to mainland Portugal.

## Related guides

- [Corporate Tax in Portugal (2026): IRC Rates for an Lda.](https://getlda.pt/guides/portugal-corporate-tax-irc.md)
- [Registered Office in Portugal: Can I Use a Virtual Office?](https://getlda.pt/guides/registered-office-virtual-office-portugal.md)
- [How to Register a Company (Lda.) in Portugal: Step-by-Step Guide](https://getlda.pt/guides/how-to-register-a-company-in-portugal.md)

Ready to open your Lda.? Licensed Portuguese lawyers handle it 100% online: https://getlda.pt/register